Our banking editor Peter Thal Larsen has been following the news from HSBC last night and this morning. He writes: “HSBC’s profit warning – its first ever – raises as many questions as it answers. In a conference call this morning, chief executive Michael Geoghegan and Douglas Flint, the finance director, put a brave face on the news and did their best to persuade the market that HSBC’s senior management is getting to grips with the problems in the US mortgage business. Geoghegan says his ‘hands are all over this’ which, given his reputation as a hard-nosed cost-cutter, must be making HSBC’s senior US executives feel pretty uncomfortable.
“However, it’s still not entirely clear how a business that has been part of HSBC for almost four years was able to make such a big bet on the US mortgage market and get it so comprehensively wrong. This begs all kinds of questions about HSBC’s risk controls and its ability to competently manage a bank with operations that span the globe. It also prompts the question of whether the bank should be in the US consumer lending business at all. Geoghegan insists the business is not for sale. I wonder whether shareholders agree.”
In other news, Imperial Tobacco is, coincidentally, taking its first (“low risk”, it says) step into the US. It is buying CBHC, the US-based owner of Commonwealth Brands, for £974m ($1.9bn) cash. Commonwealth Brands, maker of the USA Gold and Sonoma brands, is the fourth largest cigarette manufacturer in the US and is owned by Houchens Industries. Imps suggests this may be the first of several deals to come in the Americas. Investors, some of whom hoped Imps would itself be bought, seem unimpressed: the shares fell 3 per cent this morning.
Among the FTSE 100 companies reporting today is BT, which looks impressive. Its Q3s are in line but it says its share of the market for new broadband customers in the third quarter rose to 34 per cent, up from 25 per cent in the previous quarter, the highest level in over two years. The shares rose 3½ per cent.
ICI is suffering in the US, though not to anything like the same extent as HSBC. Today it reported results hit weak trade in the North American paints division among other things.
Weaker-than-expected organic growth at Unilever last year has knocked the shares despite the company, which has just named Michael Treschow as its next chairman to replace Antony Burgmans, reporting a 7 per cent increase in 2006 pre-tax profit. The group also said Rudy Markham would retire as Unilever’s chief financial officer at Unilever at the AGM in May, aged 60.
British Gas, the UK energy distribution arm of Centrica, stole a march on its rivals on Thursday with double-digit tariff cuts, triggered by falling wholesale gas and electricity prices. The move will reduce standard gas tariffs by 17 per cent and electricity by 11 per cent. Lots of gas today: we also have BG results. It has reported an 18 per cent decline in fourth quarter net profit, partly because of warm weather, but is upbeat about the outlook.
Rumour of the Day: Mitchells & Butlers shares are up today. Neil Hume on our markets desk says this is on hopes that Robert Tchenguiz will use the proceeds from selling his stake in Sampo to increase his 15 per cent holding in M&B, and that he would then press for it to convert to a Reit.